Interserve halves losses and sweetens rescue plan

27 Feb Interserve made a pre-tax loss of £111.3m, which is bad, but a lot better than the £244.4m it lost in 2017.

RMD Kwikform is being saddled with £350m of debt

It has also revealed revised details of its deleveraging plan, which has been agreed with all of the lenders, bonding providers and the Pension Trustee. Shareholders get to vote on it next month.

Results for 2018 published today show that there was an improvement in Interserve's underlying operating profit – up 10% from £84.5m in 2017 to £92.7m in 2018 – on revenue down 11% to of £2,904m (2017: £3,251).

The net debt pile climbed to £631.2m partly due to project cost escalations and partly due to delays in collecting receipts from certain Middle Eastern customers – remarkably similar reasons offered by Richard Howson for Carillion’s collapse a year ago.

Chief executive Debbie White, who joined in September 2017, said: “Despite extremely challenging circumstances, Interserve has made significant progress in 2018. Following the successful completion of the refinancing in April 2018, the business has traded robustly in some difficult markets and continued to win significant new contracts. The 'Fit for Growth' programme is delivering material cost savings and a simpler and more effective business structure. The implementation of the Group's strategy remains on track and we have delivered a significantly improved operating profit this year in line with our plan.”

She continued: “Interserve remains focused on positioning the group for long-term, sustainable success. This means continuing the operational progress we are making to put legacy issues behind us. However, the group remains over-leveraged and the successful implementation of the deleveraging plan is critical to our future, as it will ensure that Interserve has a competitive financial structure for its future growth. I would urge our shareholders to vote in favour of the deleveraging plan.”

That vote takes place on the afternoon of Tuesday 26th March at a general meeting of shareholders requisitioned by Coltrane Master Fund, Interserve’s biggest shareholder. Coltrane opposed the directors’ initial debt-to-equity swap plan that would leave shareholders with just 2.5% of the business and submitted an alternative proposal that would leave shareholders with 10%.

Further details of the deleveraging plan have been published by the company today, which now include a rights issue to raise £435.2m and leaves current shareholders with 5% of the business.

The plan to be voted on is for 19 new ordinary shares to be issued for every one existing ordinary share; for every £9 worth of new shares that lenders subscribe for, £10 of debt will be released.

The new shares issued will account for 95% of the ordinary share capital of Interserve.

As previously revealed, the profitable RMD Kwikform division will be ring-fenced within the consolidated group with £350m of existing group debt allocated to it.